Bankers pitch for National Asset Management Co; stake dilution

Worried over the spurt in bad loans, bankers today asked the Finance Minister to consider setting up a National Asset Management Company to deal with the problem and address capital issues of state-owned lenders.
"There were some suggestions on setting up of National Asset Management Company," Financial Services Secretary G S Sandhu said after Finance Minister Arun Jaitley's pre-budget meeting with heads of banks and financial institutions here.
The proposed asset management company will take over large non-performing assets (NPAs), or bad loans, of banks and help in reviving companies ridden with bad debts.
"Major suggestions included...Statement in budget regarding recapitalisation of public sector banks, dilution of government ownership in public sector banks up to 51 per cent...," the Finance Ministry said in a statement.

Other recommendations included implementation of recommendations of the Naik committee report, removal of mismatch between asset liability and banks' balance sheets and need to revise the definition of priority sector lending, among others, it said.
In his opening remarks, Jaitley said the slowdown in economic growth, coupled with high inflationary pressure, poses a challenge to the economic environment.

"We together need to steer the economy in the right direction," he said.
The gross non-performing assets of public sector banks rose to Rs 2.03 lakh crore at the end of September 2013 from Rs 1.55 lakh crore on 31 March, 2013.

The level of NPAs in the domestic banking system was 4.4 per cent of gross advances at the end of December 2013.
"There was discussion on NPA. There was also a proposal for setting up of National Asset Management Company for improving the performance of DRTs (debt recovery tribunals) to collect loans," HSBC India country head Naina Lal Kidwai said after the two-and-a-half hour meeting.
Suggestions were made to strengthen the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act to ensure fast recovery of bad loans, she said.
There was a recommendation to raise the tax benefit limit for health insurance and for the tax exemption under Section 80C of the Income Tax Act to be enhanced from the existing Rs 1 lakh per annum.

Some also pitched for continuation of interest subvention scheme for investment lending in agriculture sector, insurance awareness to be made part of corporate social responsibility and interest subsidy for solar power projects.